The Venture Capital firms are all cryptocurrency. This is something that is going to have to change. In fact, we are already seeing the groundwork laid.
Venture Capital firms provide a tremendous service. They do, however, also feed into the wealth inequality that we see. Presently, it is dominated by a few major firms who have the capital and clout to get the best opportunities. Of course, the average person is left out of the mix completely.
Firms of this nature provide start up and early round capital for firms that often are nothing more than an idea. Some of the largest firms today were formed in that fashion. Since they tend to lose money for a lot of years, the VC money helps to meet the ongoing expenses. These companies tend to focus long term so they are aware of the situation. They are also playing the numbers game, realizing they will lose a lot more than they win. However, if they hit on a Coinbase™ as an example, it more then compensates for the other investments.
We often see this in the technology industry. The challenge arises in that, at some point, the VCs want to get paid. In this situation the focus moves away from the users to the monetization of them. We saw this scenario play out dozens of times and it is a model that is not going to change. It is why the "users become the product".
It should be fairly clear that cryptocurrency can offer a better model.
Technology start ups are not the only area where we see something like this happening. On a different scale, but using the same funding idea, we have films. These projects raise money from money players. The producers of the movies raise the funds (or use their own) while offering returns based upon the success of each one.
Of course, these are big money players and the average person is shut out. Naturally, many of these are high risk endeavors with great failure rates so not all belong involved. However, could there be a way to work this differently.
Crowdfunding provided us a bit of a glimpse. We recently saw this taken to another level to fund a documentary about Ethereum and Vitalik. The film was able to raise $2 million.
While this was done in a centralized fashion, we can also envision how this could be taken to the next level: decentralized, tokenized financing for film production.
This could extend to all areas of financing.
We often discuss the tokenization of everything. This is used to the point where it is a catchphrase but it really does epitomize what is taking place.
If we think about the idea of tokenizing the Ethereum documentary, the producers could have issued a certain number of tokens for sale. They could be placed on a decentralized platform which would the enable anyone to buy into the project. Since tokenization offers fractionalization, we could see a lot of people buying small pieces if they desire.
Here is where we could see a major impact on wealth inequality. Since anyone could get involved, the successful projects would benefit a wider cross section of people. At the same time, risk is minimized since more people will fund the project with smaller amounts of capital.
We are using films as an example but this could apply to music, art, real estate, or tech companies. An idea with a sound business plan could be funded and put into practice. Experimentation and innovation would skyrocket.
This would also help the inequality around the world. Consider the plight of a farmer in a 3rd world nation who needs money for seeds and equipment for the growing season. Here, too, we could crowdsource this through tokens, providing holders a return if the crop is successful.
Suddenly, billions would have access to capital markets that really do not exist today.
Of course, for this to happen we need to obliterate the regulators who are using outdated securities laws to control the raising of capital.
We have the ability to print currency. This is one of the major benefits to cryptocurrency: anyone can produce tokens.
Right now, the money flowing in is from Venture Capital firms. As stated, there is no way to avoid the users versus profits dilemma. These entities are not putting up the money out of the goodness of their heart. They expect a return at some point.
Tokenization changes this completely. As we see with the core level tokens, the users are often the stakeholders (depending upon the type of system). Hence, they have a vested interest in what takes place.
While we can debate how centralized some are, the basic concept is in place. However, this tends to go away at the secondary level. Here is where we see VCs like Mark Cuban entering with big money and funding application development that could end up becoming the popular brands. The problem with this is his VC firm will end up taking the lion's share of the profits.
The cryptocurrency industry needs to evolve to the point that we are self-funding. Some mechanisms are in place such as the DAO on Hive. This pool of money is set aside to fund development and is voted upon based upon individual user stake. We should see more of this along with layer 2 applications that provide the platforms for people to post their projects for funding.
Presently, the decentralized finance platforms that are being built model the existing financial infrastructure. We are still mired in the "casino" mindset that is Wall Street. It is all about trading, speculating, and earning a quick return. "Investment" is not something we see a great deal of at this point, at least within the industry.
Instead, we are giving that to the Venture Capital firms. They are going to reap the windfall of the success within this industry like they did the last 25 years with the Internet. It is not something that we can allow to happen.
Fortunately, we now have a mechanism which to do that. We can replace the entire Venture Capital system within a few years if we get the infrastructure in place and start to fund the projects that will help our industry grow. At the same time, we can focus outside of this, into areas such as films, agriculture, and whatever else comes to mind.
In short, we can really start to decentralize the economy and the financial benefits that are paid out. As more people acquire cryptocurrency from their activities, each of us basically can become a Venture Capital firm. Instead of a few major players dominating, we can have more than a billion of them around the world.
This is how abundance enters the picture and also a change in the distribution mechanism. There is no doubt technology generated a massive windfall in wealth. However, we also know that it has not reached the hands of too many people.
Tokenization can change all that. However, for that to happen, we need to change our mindset from the casino to actually investing and building. Too many want the quick hit.
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